April 17, 2017, © Leeham Co.: Buckingham Research Group last week issued back-to-back notes about Boeing. One was a recap of an investors call with Steve Rimmer, CEO of Altavair Airfinance (nee Guggenheim Aviation partners). The other was BRG’s earnings preview, the first off the mark for Boeing’s earnings call on April 26.
I’ll include a summary of BRG’s earnings preview in a subsequent post when other analysts issue their previews.
BRG’s Rimmer note is lengthy and covers industry issues beyond Boeing. Here are a couple of the Boeing-focused points:
“A cool reception among the lessor community for the B737 MAX 10. Boeing presented details of the B737 MAX 10 concept at the ISTAT conference on March 5-7th. The airplane was a topic of discussion among lessors and the consensus view was mixed, with many thinking that the airplane (as presented) was a compromise. BA has been losing market share at the upper end of the narrow body market (the A321neo vs. the B737 MAX 9) and the B737 MAX 10 is BA’s attempt to improve its narrow body product offering and stop the market share loss to Airbus. The view of lessors, which reflects the view of airlines, was that it likely won’t stop market share loss as the airplane doesn’t deliver compelling economics vs. A321neo.
“After listening to Mr. Rimmer’s comments, we’re a bit more optimistic that BA will launch the new B797 or New Midsize Airplane (NMA). Last year, our analysis identified two potential issues with BA’s Middle of the Market (MOM) or New Midsize Airplane (NMA) concept: 1) the potential that the market size is insufficient to justify launching a new $12B airplane program, and; 2) the likelihood BA would need to charge widebody prices for the airplane to customers who were willing to pay narrow body prices. We were skeptical that BA would launch the program. Rimmer notes that the 797 concept being proposed is a twin-aisle with new engines, approximately the size of a 767-200, with a composite fuselage and wing. What’s important is that BA is marketing the concept in both passenger and freight versions. By targeting both passenger and freight markets, we now think the market size may be sufficient to justify BA launching the airplane. We think BA could launch the plane at the Farnborough Airshow next year.
“The Airbus response to the B797 – Mr. Rimmer notes that he hasn’t seen any real evidence that Airbus will respond to a 797 with a stretched A321neo or a new airplane. Mr. Rimmer believes that a stretched A321neo cannot deliver the capabilities that a 797 could offer. Mr. Rimmer also believes that Airbus might find it difficult to launch an all new airplane of their own but that one way Airbus could respond would be to try to undermine launch of 797 and shrink the market. Airbus could offer significantly discounted A330-200s.”
Ken Herbert of Canaccord Genuity separately had this to say about the 7M7:
“We expect the MOM debate to dominate much of the 2017 narrative. We understand Airbus has made advances with its potential A322, but it is early in the process, and we do not necessarily see a launch this year. However, this would represent incremental pressure on Boeing, which wants to wait as long as possible on its MOM offering and is working to extend 757 fleets as long as possible.”
Pratt & Whitney continues to work out problems with its A320neo GTF. Airways magazine first reported that Ultra Low Cost Carrier Spirit Airlines has three A320neos parked at, of all places, Dallas-Ft. Worth International Airport. The aircraft’s engines, windows and wheels are covered as if for long-term storage.
Flight Global has this report detailing what’s wrong.
PW previously announced it will produce 350-400 engines this year, with about 50 of them dedicated as replacements for early GTFs.
With Bombardier forecasting delivery of 30-35 CSeries this year, this means Airbus should deliver between 120-140 GTF-powered neos.
Airbus should deliver at least an equal number, if not more, of the A320neo powered by the CFM LEAP-1A. CFM has about a 55% market share of neo sales.
Together, these should represent less than half the A320 family deliveries this year.